NOTE: Digital currencies are not legal tender
Digital currencies, such as Bitcoin or other cryptocurrencies, are not legal tender in Canada. Only the Canadian dollar is considered official currency in Canada.
The Currency Act defines legal tender as:
- bank notes issued by the Bank of Canada under the Bank of Canada Act
- coins issued under the Royal Canadian Mint Act
Digital currencies are not supported by any government or central authority, such as the Bank of Canada.
Financial institutions, such as banks or credit unions, don't manage or oversee digital currency.
Q1. What is digital currency?
- Digital currency is a type of currency available only in digital form, not in physical form (such as banknotes and coins). Digital currencies may seem to exhibit similar properties to physical currencies but also allow for some properties that are not available with physical currencies, such as instantaneous transactions and borderless transfer-of-ownership. Examples include virtual currencies and cryptocurrencies or even central bank issued "digital base money." Like traditional money, these digital currencies may be used to buy physical goods and services, but may also be restricted to certain communities, such as for use inside an online game or social network.
- Digital currency is usually reflected as a money balance recorded electronically on a stored-value card or another device. Another form of electronic money is network money, allowing the transfer of value on computer networks, particularly the Internet. Electronic money may also be a claim on a private bank or other financial institution such as bank deposits.
- Digital money can either be centralized, where there is a central point of control over the money supply, or decentralized, where the control over the money supply can come from various sources.
Q2. What is bitcoin?
Bitcoin is a digital asset and a payment system invented by Satoshi Nakamoto (this may or may not be a real name, and this may possibly be one individual, or could be several people), who published the invention in 2008 and released it as open-source software in 2009. The system is peer-to-peer: users can transact directly without an intermediary. Transactions are verified by network nodes and recorded in a public distributed ledger called the blockchain.
Q3. What are the differences between different digital currencies?
Bitcoin is a digital currency that you can send to other people. This may be as a gift, for services, or for a product.
Alternative currencies to Bitcoin are often referred to as altcoins. There are more than a thousand altcoins in existence. The majority of altcoins are just alternate versions of Bitcoin with minor changes.
The ‘token’ is one of the three main types of cryptocurrency. Compared to the other two types of cryptocurrency, tokens are completely unique as they do not ‘have’ their own blockchain. They are used on dApps (decentralized applications): these are the apps that can be built on blockchains like Ethereum and NEO. The dApps are built to use smart contracts.
Ripple is a blockchain that is designed to be used by banks to make their payments faster. It is known as the banker’s coin, and there are many partnerships with global banks currently being worked on.
Litecoin is a ‘fork’ of Bitcoin. the blockchain of Litecoin used to be a part of Bitcoin’s blockchain, but it split when the Litecoin update was offered. It’s very similar but it has a few different features compared to Bitcoin. It was created to improve upon what Bitcoin had created.